When I was assigned responsibility for managing sales and marketing for my old company’s computer division, I spent about as much time selling as I spent managing. Our company had recently developed the first building supply industry-specific point of sale computer system. That’s when I learned that everything is negotiable.
We knew a lot about selling, but we quickly learned that we were novices at negotiating. Some of my personal shortcomings were revealed when I made a sales call on a dealer who had told me he was ready to install a $200,000 computer system. The way the owner of the business talked to me over the telephone, I thought getting his signature was going to be nothing more than a formality.
When I arrived, the owner greeted me warmly and invited me to join him in his office. After spending a few minutes passing the time of day, the owner asked permission to leave the room to take a personal telephone call. Not five minutes after he left, in walked an older man who didn’t ask, but demanded to see my contract, so I pulled out the contract and handed it to him.
The old man (who turned out to be the owner’s father) took one look at the price, banged his finger on the desk, looked me right in the eye and said: “You can do better than that!” Well, I did have pricing authority and I did want to get a signature, so I took the easy way out and offered him a small concession, to which he responded in a booming voice, “You’re getting real close!”
Inspired by the older man’s comment, I assumed I was going to have to make another concession, so I lowered the price again, to which he responded, “You’re almost there.” Using this technique, I had been persuaded to reduce our price three times.
It was at this stage in my career that I realized I needed some more training in the art of negotiating. Everything is negotiable. Here are some of the lessons I learned:
- When dealing with buyers who you know from experience flatly refuse to pay your asking price, consider inflating the asking price to give yourself room to reduce your asking price without sacrificing gross margin.
- Do your homework. Spend the time necessary to prepare for the negotiation. Gut feelings are no match for information.
- Never ever give up anything without at least attempting to get something in return. If I do this for you, would you be willing to do that for me?
- Always ask your negotiating partner the question: Who in addition to you will participate in the buying decision? It’s best to learn upfront who all of the decision-makers are.
- Don’t agree to individual concessions until you know everything your opponent is going to ask for. When your opponent asks for a concession, say, “I’ve made a note of that point, what else is important to you?”
- Never allow a buyer to sucker you into negotiating the price unless the buyer at least conditionally agrees to buy.
- Let the other side make their offer before you make your offer. You may be surprised at what your opponent puts on the table.
- Remember that even though everything is negotiable, negotiating is a game. Off the top of my head I can think of at least four best-selling negotiating books that have Negotiating Is a Game in their title. Make sure you know the rules of the negotiating game.
- Remember the power of the IF word. This word is invaluable in learning the real reason for a no answer. Ask the following question before agreeing to meet a competitor’s price: “If our price were item-for-item and line-for-line identical to our competitor’s price, are you telling me we could do business?”
Everything is negotiable, and training in the basic rules of the negotiating game is essential if management allows the sales force to have pricing authority.